Zunephone- It isn't happening, from the Big man Himself
Bill Gates was quoted as saying
"No, we won't do that. In the so-called smart phone business we will concentrate solely on software with ourprogram," Gates was quoted as saying in the interview published on Wednesday. "We have partnerships with a lot of device manufacturers from Samsung to and this variety brings us significantly more than if we would make our own mobile phone,"
So unfortunately, it's not coming. Unless they are just keeping it secret and don't want to tell us, so they make up this. Or maybe those pictures of Windows Mobile 7 will really have the Zune UI in it, but they will only include it more as a mobile phone media player application, similar to Windows Media mobile.
I'm actually happy with using a windows mobile phone and my Zune separately, because they both have their own benefits, and some of those benefits wouldn't exist if they were both the same device. (like having 2 batteries is better than 1) If you want something like the iPhone but you also want a Zune, I think it's better to just get a small Windows mobile phone and a Zune, it's better in some ways.